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st: xtreg, fe - xtivreg2, fe and panel units non nested within clusters

From   Agnese Romiti <[email protected]>
To   [email protected]
Subject   st: xtreg, fe - xtivreg2, fe and panel units non nested within clusters
Date   Wed, 10 Aug 2011 13:04:32 +0200

Dear statalisters,

I need to run xtreg, fe and xtivreg2, fe with a cluster variable which
changes within the panel identifier.
I get two errors messages:  when I run xtreg , fe I get the following
error message

''panels are not nested within clusters''

Whereas when I run xtivreg2, fe  the error message is the following

''cluster option not supported if a panel spans more than one cluster''

I tried to perfom manually the within tranformation and then I run the
commands reg and ivreg on the pooled tranformed sample. In such a  way
the program allows me to use the cluster robust SE even though the
panel variable is not nested in the same cluster.
Is this procedure correct or is there any better alternative to fix
this problem due to the cluster option?

Before following this route I checked whether my pooled OLS regression
on the transformed data ( without using any cluster option) provides
identical results to the case of running xtreg, fe. But unfortunately
this is not the case: the results I obtained by the manual
transformations are not identical to the ones obtained by using xtreg,
fe as I would have expected.
This is the code I've used in order to trasform the data

foreach num of varlist var1 var2 {
bys id: egen mean_`num'=mean(`num')
gen `num'_t=`num'-mean_`num'
drop mean_`num'

I was wondering whether this problem has to do with the way xtreg, fe
is implemented in Stata.

Many thanks

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